Zomato shares in focus today as two brokerages see up to 30% upside

Shares of online food delivery provider Zomato Ltd are in focus today after financial services firm Motilal Oswal initiated coverage on the stock with a target of Rs 70. The target price amounts to an upside of 30% against the previous close of Rs 53.91 on BSE. In early trade, Zomato stock touched a low of Rs 53.47, falling nearly 1% on BSE. The stock opened marginally higher at Rs 54.

In a year, the stock is down 35.01% and fallen 9.17% in 2023. The stock hit a 52-week high of Rs 84.40 on April 18, 2022 and a 52-week low of Rs 40.55 on July 27, 2022.

Total 0.60 lakh shares of Zomato changed hands amounting to a turnover of Rs 40.34 lakh on BSE. The market cap of the firm stood at Rs 45,675 crore on BSE.

In terms of technicals, the relative strength index (RSI) of Zomato stock stands at 56, signaling it's trading neither in the overbought zone nor in the oversold zone.

Zomato stock has a one-year beta of 1.5, indicating high volatility during the period. Zomato stock is higher than 5 day, 20 day and 50 day moving averages but lower than 100 day and 200 day moving averages.

Motilal Oswal said, “The strong growth will be complemented by Zomato turning profitable over FY25, with gross margin improving to 33.5% in FY25 from 5.3% in FY22. Heightened competition for Blinkit and attrition at senior leadership are areas of concern. We initiate coverage with a BUY rating and Rs 70 target price, implying 30% upside.”

ICICI Securities has assigned a target price of Rs 65 on the Zomato stock.

“Slowing growth was evident in gross order value (GOV) due to post-Diwali consumption fatigue and the online-to-offline shift. However, based on sustained improvement in the underlying operating metrics, we maintain BUY on Zomato with a DCF-based target price of Rs 65. We acknowledge that further slowdown in growth poses a risk to our FY24E/FY25E estimates, but we think, at current market price, the risk reward is still skewed to the upside (2.6:1),” said the brokerage.

The firm's December quarter loss widened to Rs 346.6 crore on year against a loss of Rs 63 crore in the year-ago period.

Zomato's revenue from operations rose 75% to Rs 1,948 crore in the December quarter against Rs 1,112 crore in the corresponding period of last year. On a sequential basis, revenue climbed 17% as against Rs 1,661 crore reported for Q2FY23.

Adjusted revenue - on a year-on-year basis - saw a 66% growth to Rs 2,363 crore. However, adjusted EBITDA loss rose to Rs 265 crore in the December quarter as against Rs 192 crore in the quarter ended in September last year. Excluding Blinkit, the operating loss was Rs 38 crore compared with Rs 272 crore a year ago.

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